A need for changed attitudes or the industry will split into two
In this follow-up opinion I ask why many contractors have been bidding on silly terms; and predict that the industry may split into two.
Further to the earlier examples of draconian clauses, many readers have provided me with numerous further examples of grossly unfair conditions. Furthermore, these unrealistic burdens are consequentially imposed on subcontractors by head contractors.
May I dispel any thought that I am being unduly contractor friendly. I have been very vocal against draconian clauses in my advice to owners for over 30 years because they do not benefit from them in the long term. This is because good contractors will load their price to cover the extra risk (and often miss out) and less responsible contractors will take those risks and either try to bring unjustified claims for extras to compensate or perhaps not complete the job (with disastrous consequences for the owners).
One might ask, why do contractors take these risks when they have the option of not tendering? The simple answer lies in the billions of dollars which they have tied up in plant, equipment and personnel. So, is it good business for the owners to take advantage of that to get the lowest possible price? Some probably think so, but that really is a short-sighted view. It is one reason why there is now a shortage of sound contractors when the industry should be booming.
This crucial point can be illustrated by reference to the larger projects. When tenders are invited for large projects, the owner will always insist on bidders with strong balance sheets. They will reject anyone without one. But how does a pool of bidders with strong balance sheets become